As we move into the second quarter of 2011, self-storage operators should assess their facilities progress to this point, especially those managed by a professional management company. But before meeting with your third-party provider, identify your own expectations.
Ask yourself: What constitutes a successful year for your facility? Is it a 5 percent increase in revenue, a 3 percent decrease in expenses, or a 5 percent increase in net operating income (NOI)? Are you swinging for the fences expecting double-digit increases and decreases across the board? Are you near your internal targets? Are your customers satisfied? Are facility managers content and properly trained? Is the facilitys curb appeal at an acceptable level?
Beyond these questions, hows your management company handling the intangibles? Are you happy with the level of communication? Does the company provide you with the items it claimed it would in a timely manner? Do you enjoy speaking with your representative? All of these things should be factored into the evaluation of your management company.
Assessing Your Operation
The basics of evaluating a third-party management company are simple and straightforward. Evaluating intangibles is not always simple and relies on the judgment of the self-storage owner or investor. The main question is always: Is your investment better off since you hired a management company, or has facility performance been lackluster?
Now, taking into account that weve just experienced one of the worst recessions in history, along with crippling job losses and a devastated real estate market, is your investment better off than last year? In general, your management company should be performing in the following six categories.
Financial targets. These are extremely easy to review. Are your facilitys revenue, expense and NOI numbers in line with your expectations? Does its profit and loss report have any resemblance to this years forecasts? Did your management company give you any projections for 2011? If not, why? You cannot hold someone accountable for performance if theres no benchmark on which to base it.
Marketing. Is your management company marketing your facility effectively? Do you have a successful Internet campaign complete with a website optimized for search engines? Are you making strategic alliances with businesses in the area? Do you have a strong referral program? Are you tracking your results to allocate funds for the most effective campaigns?
Training and manager evaluations. Are your facility managers content and well-trained? Does your management company have an effective training program? Are the lines of communication open between the management company and your managers?
Maintenance and curb appeal. Is your facilitys condition and appearance up to your standards? Have projects been contracted or completed? Did they come in at the projected cost?
Onsite visits and groundwork. Does your management company visit your facility? I recently consulted with a facility manager who had not seen or spoken to his district manager in three months. The only communication in this situation was through text messaging. This is not an effective way to manage a self-storage facility.
Technology. Does your management company understand todays technology? There are so many effective and efficient ways to manage self-storage operations online that its imperative your management company be familiar with the latest innovations.
Evaluating the Intangibles
Evaluating your management company through performance metrics is straightforward. Assessing intangibles is not. Consider the following:
Compatibility. Do you like working with your management company? Regardless of performance, if you cant stand the people you work with, the relationship will deteriorate quickly.
Communication. Does your management company return your calls and e-mails in a timely manner, if at all? Does it meet your technical needs? Would you like items e-mailed to you instead of faxed or mailed? Do you have access to online reporting?
Reporting. Does your management company provide you with the necessary reporting on a daily, weekly or monthly basis?
Investments and exit strategies. Can your management company help you with additional investments or an exit strategy from your current facility? As you become a seasoned self-storage investor, you may want to discuss buying an additional facility, selling your existing facility, or developing a new one. Can your management company help you with that process?
Open Lines of Communication
As an owner or investor, if you need something or feel something is missing in regard to the management of your facility, just ask. All management companies look forward to speaking with their customers, and most wish to do so more often. A management companys job is to serve the operational needs of the facility. As with any partnership, you must have clear expectations. Are yours in line with your market?
Hiring a third-party management company will not change certain things about your area. A management company cannot change the fact that your local municipality approved eight new self-storage facilities within a 3-mile radius of your site. It cannot change that a developer paid Manhattan, N.Y., real estate prices when developing a facility in Manhattan, Kan. And it cannot change the fact that an owner or investor overpaid for a facility.
With that said, a management company can help you with any of these situations by increasing NOI to a level that most individual investors couldnt accomplish on their own. Management companies are experts in streamlining operations, opening new revenue streams, and decreasing expenses. Within the first month of the partnership, most management companies can identify ways to increase revenue and decrease costs at any facility.
If youre looking for a management company, take the time to do your homework and interview a number of companies. This could lead you to the investment partnership of a lifetime.
Matthew Van Horn is vice president of Cutting Edge Self-Storage Management, a full-service management company specializing in management, feasibility studies, consulting and joint ventures within the self-storage industry. He is well-known for finding hidden profit centers in self-storage operations. For a complimentary copy of Hidden Profit Discovery Session, send an e-mail to [email protected]. For more information, call 866.970.EDGE or visit www.cuttingedgeselfstorage.com. Follow the company on Twitter at Cuttingedgemgt, and on Facebook at Cutting Edge Self-Storage Management.